ACCA FM Syllabus E. Business Finance - Impact of cost of capital on investments - Notes ^{4 / 6}

if a company has a low cost of capital, it will have higher NPVs

A positive NPV of 100 will increase the value of a company by 100

So, the lower the cost of capital the higher the value of a company

WACC can be used to appraise an investment when:

• The project is relatively small

• The existing capital structure (debt to equity) will be maintained

• The project has the same business risk